Anyone tried the Mendosa equity question set on the CFAI website? The answer they give for question #6 regarding terminal value appears to be wrong in my estimation.
I’m getting the same RI of $10.86 and the same terminal value of $87.58 they are, the difference is they are discounting the $87.58 back 5 years, whereas I’m discounting back 4 years. The reason why I discount it back 4 years, is because the continuing RI of $10.86 BEGINS in year 5, not after year 5. In other words, at the end of the growth period in year 4, they begin making RI of $10.86 forever. The way I’m doing it is how the Schweser notes instruct you to do it.
Can anyone confirm whether or not I’m doing this wrong?